In a BLR webinar entitled ‘Incentive Pay: Best Practices for Designing and Managing Pay-for-Performance Plans’, Dan Kleinman explains that commissions are one of the types of incentive pay found within an organization. Commissions as incentive pay is described below:

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Employees earning commissions are paid in whole or in part based on a percentage of their sales made

One model is base pay plus commission, in which workers earn a set salary plus an incentive that’s calculated as a commission (e.g. $30,000 base plus 5 percent of gross sales)

Another model is straight commission, in which workers are paid solely with commissions on sales

In both situations, the incentives typically increase as workers grow their sales volumes

Dan Kleinman is the principal of Dan Kleinman Consulting, a California-based compensation and human resource consulting firm. For the past 18 years, he has served as an independent consultant for a broad spectrum of regional, national, and international companies, providing compensation, performance, organizational planning, and reward-system design services. He can be reached at info@dankleinmanconsulting.com.